Is the UAE a safe haven for international fraudsters?

Dubai has been recently lambasted as a “money laundering paradise” by Transparency International and there’s no doubt that Dubai and the UAE in general are lagging in the world of compliance and regulation. So TI’s assertion did not take me by surprise. Let’s face it, the UAE’s approach to the rule of law can be puzzling to those of us on the outside looking in.

Take the case of Asa Hutchinson, for example, a British woman jailed for three months in Dubai last autumn. She’d witnessed an altercation involving a Swedish national and some of her friends. But after her friends returned to the UK, and despite her only witnessing the alleged assault, the Swede in question “transferred” all the blame and allegations onto Ms. Hutchinson, simply because she was resident in the UAE, rendering her responsible under their laws. Staggeringly, the Dubai legal system works on an assumption that whoever makes the first complaint is most likely to be believed.

Similarly, the UAE is loath to extradite suspects from its shores. My UK-based investigator has had two experiences of UK suspects fleeing to the UAE and then issuing bouncing checks, knowing that this is a criminal offense in that region. Once the suspects were under investigation by the UAE authorities, they could not be extradited because they were under criminal suspicion there.

In the case of the bouncing checks, this is a classic delaying tactic — almost without risk — given that a wrongdoer will have likely issued the check to an accomplice. When the case nears conclusion, all the subject may need to do is to settle the debt (if there ever was one) and they are no longer under a UAE investigation.

This tactic can be highly effective. One of the main reasons that UAE authorities refuse to extradite a suspect is the issue of time lapse: the opinion that the historical nature of the alleged crimes precludes the suspects from facing the UK courts for trial. So any means of delaying extradition may see this “threshold” breached and a potential prosecution elsewhere fail.

I have no issue in regard to how the Emirates views the topic of bounced checks: in fact I wish we in the West were as strict with those who use them here. What I do have an issue with is the scenarios depicted here, where legislation is clearly being manipulated for ulterior motives.

In several of the cases where extradition has been declined, the individuals have been suspects in a multi-million pound Missing Trader Intra Community Fraud, also known as a “Carousel Fraud.” The sums lost to this form of Value Added Tax fraud can be vast, in several instances in excess of £100 million ($130 million) or more.

If the suspects have successfully moved some of their money to the UAE, they can flee there with near-impunity. The losses to the UK and EU purse for this type of fraud are estimated to be in the region of $68 billion per annum (Europol figure). This is not some low-end breach. It is a truly nefarious crime, robbing the UK and EU residents of funds that could be used to build schools, hospitals, or other public infrastructure.

In fairness, the UAE is not alone when it seeks to apply its own rationale to the issue of extradition. Many jurisdictions, when faced with harboring such suspects, will acquiesce to the request wherever the law of extradition requires it. By declining to do so, the UAE is effectively providing safe harbor to these suspects. In turn, by allowing them to purchase properties in the UAE, they are complicit in the money laundering process.

But worryingly, the issue of money laundering isn’t restricted to acquisitive crime insofar as the UAE is concerned. Sadly, there are also significant indicators that suggest others in the wider Middle East region are knowingly or unknowingly complicit in laundering money for terrorist organizations.

David Aufhauser, a former legal advisor to the U.S. Treasury, spoke on a recent panel concerning money laundering and money transfers. He explained that the Financial Action Task Force had issued a report in November singling out Saudi Arabia for not doing enough to tackle the issue of terrorist financing, and accused the UAE of being the main hub for the transfer of funds used in terrorist acts.

Aufhauser continued to explain that more than 80 percent of wages in the UAE were transferred to foreign workers’ countries of origin. As these fund transfers may be used to finance terrorism, he questioned the “ability of the UAE authorities to monitor all these financial operations.”

Dubai and the UAE in general are wealthy and rapidly developing corners of the globe. Given that they have the resources to implement change, including stepping up to the standards of financial regulation in place elsewhere in the world, the UAE really does need to get its fiscal governance house in order.

As the saying goes, “Rome wasn’t built in a day.” But change is needed, and it is to be hoped that those with the power to do so make these changes sooner rather than later. Because right now it is simply unacceptable for the Emirates to provide succor to criminals fleeing their own jurisdictions in order to escape justice. It is also wrong of them to permit these crooks to manipulate legislation to their own ends.

With thanks to Tony McClements, Senior Investigator at Martin Kenney & Co, for his assistance with this post.

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Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI, focused on multi-jurisdictional fraud and grand corruption caseswww.martinkenney.com | @MKSolicitors. In 2014 he was the recipient of the ACFE’s highest honor: the Cressey Award for life-time achievement in the detection and deterrence of fraud. He was selected as one of the Top Thought Leaders of the Legal Profession in 2018 and 2019 by Who’s Who Legal International and as the number one offshore lawyer for asset recovery in 2017 and 2018.

Martin is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI, focused on multi-jurisdictional fraud and grand corruption cases.In 2014 he was the recipient of the ACFE’s highest honor: the Cressey Award for life-time achievement in the detection and deterrence of fraud. In 2017, 2018, 2019, and 2020 he was chosen as a global elite “Thought Leader” by Who’s Who Legal and also selected as the number one offshore asset recovery lawyer worldwide over the same period.

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